November 2010 Industrial Production

The November IPI report was a bit of a mixed bag – while growth certainly took a step back, it’s not a bad as it looks on first blush.

While the annual percentage changes showed growth, month-on-month numbers were negative – but that’s a seasonal effect. The seasonally adjusted numbers were kinder (log annual and monthly changes; seasonally adjusted):

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I suspect, much like the trade numbers, what we’re really looking at here is orders and order fulfilment that were brought forward from October from November. Somewhat more comforting is that manufacturing output is still unequivocally increasing, with much of the pullback in the index coming from mining (which is notoriously volatile) and a somewhat surprising reduction in electricity output.

I’m inclined at this stage to write off the November numbers as a one off.

Nevertheless, these numbers do dampen the potential for 4Q 2010 GDP performance – plugging the average IPI reading into my IPI-based forecast model yields an estimate of 4.15% annual real GDP growth, which would drag down full-year performance from my earlier estimate of 7.2% to a hair under 7.0%:

Point Forecast: RM143.2 billion; Range Forecast: RM149.3-RM137.1 billion

Technical Notes:

November 2010 Industrial Production Index Report from the Department of Statistics